Paul Krugman: We're in for a Year of 'Economic Hell'

[marmar]

via AlterNet:



Krugman: We're in for a Year of 'Economic Hell'

By Paul Krugman, The New York Times. Posted December 23, 2008.

Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better.



Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better, as President Obama's stimulus plan -- O.K., I'm told that the politically correct term is now "economic recovery plan" -- begins to gain traction. Late next year the economy should begin to stabilize, and I'm fairly optimistic about 2010.

But what comes after that? Right now everyone is talking about, say, two years of economic stimulus -- which makes sense as a planning horizon. Too much of the economic commentary I've been reading seems to assume, however, that that's really all we'll need -- that once a burst of deficit spending turns the economy around we can quickly go back to business as usual.

In fact, however, things can't just go back to the way they were before the current crisis. And I hope the Obama people understand that.

The prosperity of a few years ago, such as it was -- profits were terrific, wages not so much -- depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn't coming back, the spending that sustained the economy in the pre-crisis years isn't coming back either.

To be more specific: the severe housing slump we're experiencing now will end eventually, but the immense Bush-era housing boom won't be repeated. Consumers will eventually regain some of their confidence, but they won't spend the way they did in 2005-2007, when many people were using their houses as ATMs, and the savings rate dropped nearly to zero. ......(more)

The complete piece is at: http://www.alternet.org/workplace/114804/krugman%3A_we%27re_in_for_a_year_of_%27economic_hell%27/

[Kolesar]

1. Krugman advocates many years of federal spending to stimulate the economy

"In short, getting to the point where our economy can thrive without fiscal support may be a difficult, drawn-out process. And as I said, I hope the Obama team understands that."

[notesdev]

2. Does anyone have any confidence

in this gaggle of corrupt legislators, that they will do anything with additional spending except to hand out the dollars to their buddies? After handing over $350 billion to Paulson to do just that, and sitting on their hands while Bernanke leverages the Federal Reserve to the hilt, all the while refusing FOIA requests as to where the money went, I have zero confidence that they will do the right thing.

[lonestarnot]

3. Zero! Zero confidence! I am surprised that Krugman says 1 year.

[oldnslo]

4. Confidence is almost impossible, and is further reduced

By being almost 70 years old. The golden years aren't so golden anymore, and the uncertainty of what little future is left is like a huge albatross around any senior citizen's neck. Being young doesn't help much either, I imagine, but at least chances are you're healthier.

[MiniMe]

5. And it would probably be even worse if Obama wasn't coming in this January

And worse if McCain had been elected.